Is Crocs Becoming The New Bull Market Proxy? (CROX)

It is true that the most speculative or most battered stocks often rise the most during the initial turnaround and recovery, and to call the latest rally since the March lows a mere recovery would be an understatement of the year.  But while the S&P has recovered 35% from lows and the NASDAQ has recovered by almost 40% from lows, shares of Crocs Inc. (NASDAQ: CROX) have exploded from their lows.  With shares up 14% today at $3.71, CROCs has risen well over 200% from the March lows and is up over 100% in less than one-month.

Back in March, Crocs looked as though it might be one of the brands that could even disappear.  It was around the same time that the company’s auditors nailed Crocs with a dreaded ‘going concern’ note.  And now this week the stock is rallying into its earnings report due in about 48 hours.

To show how much this has rallied by a stockcharts.com chart, the 50-day moving average is $1.64 and the 200-day moving average is $2.41.  Shares went firmly above the 50-day moving average a month ago and crossed over the 200-day moving average yesterday and kept on going.

Crocs shares hit a low of $1.13 in early March to coincide with the lows of the market, and went as low as $1.10 later in March after the market started its recovery.  At the lows of November for many retail and apparel stocks, Crocs hit as low as $0.79 briefly.  Just keep in mind that this has only been under $1.00 for about 3 or 4 trading sessions.

The crowd of analysts is much smaller than before, but they expect results for fiscal-2009 as being a loss at -$0.72 and $498.12 million in revenue and expect fiscal-2010 results to be a loss at -$0.33 EPS on $495.88 million in revenue.  In short, no growth but a contraction in losses.  Our reason for pointing this out is that there is just not a total recovery that is expected by those who formally rate and cover the stock.

Its most recent plunge from just under $10.00 took this stock to incremental new high levels of roughly $4.84, and $5.17 and then to $5.35.  If this stock gets back to those levels it will be key, because at that price it means that any and all of the new holders over the last six months will now have a profit in the stock.  That won’t do anything for anyone who owned this earlier in 2008, but that is not the point.  Its entire float has turned over several times since then. The long and short is that this stock could keep its run of up to another $1.00 higher before it gets at critical levels above and beyond what we have already seen.  Whether or not this gets there, that is up to the traders and the reaction to its earnings report.

Even if Crocs makes a rather large pullback from here, it may still be a proxy for just how bullish the traders are willing to treat the most speculative stocks.  This latest move has been on the backs of active traders and momentum players in the stock. Most trader and investor chat rooms are full of Crocs comments, and a move of this last sort would be considered something much more than what its newest athlete push would have likely garnered in a best case scenario.

There is one other thing to consider that we must bring attention to for the bears or for those who are cautious.  By the time articles like this start coming out, it generally means that traders are starting to reach above and beyond normal risk to find stocks that can move this much on no new news.

JON C. OGG